Bootstrapping
a Startup
Dr.
Amartya Kumar Bhattacharya
BCE
(Hons.) ( Jadavpur ), MTech ( Civil ) ( IIT Kharagpur ), PhD ( Civil
) ( IIT Kharagpur ), Cert.MTERM ( AIT Bangkok ), CEng(I), FIE,
FACCE(I), FISH, FIWRS, FIPHE, FIAH, FAE, MIGS, MIGS – Kolkata
Chapter, MIGS – Chennai Chapter, MISTE, MAHI, MISCA, MIAHS, MISTAM,
MNSFMFP, MIIBE, MICI, MIEES, MCITP, MISRS, MISRMTT, MAGGS, MCSI,
MIAENG, MMBSI, MBMSM
Chairman
and Managing Director,
MultiSpectra
Consultants,
23,
Biplabi Ambika Chakraborty Sarani,
Kolkata
– 700029, West Bengal, INDIA.
E-mail:
dramartyakumar@gmail.com
Website:
https://multispectraconsultants.com
Bootstrapping is
building a company from the ground up with nothing but personal
savings and with the cash coming in from the first sales. The term is
also used as a noun: A bootstrap is a business an entrepreneur, with
little or no outside cash or other support, launches. The word
bootstrapping has come to be used for a variety of other
self-starting processes. It describes the creation of complex
software programs in successive and interdependent stages. The term
"booting up" for starting up a computer's operating system
may come from bootstrapping. Bootstrapping has its origin in the
early 19th century with the expression "pulling up by one's own
bootstraps." Initially, it implied an obviously impossible feat.
Later, it became a metaphor for achieving success with no outside
assistance. Bootstrapping is a tough way to go. It places all the
financial risk on the entrepreneur. On the other hand, the
entrepreneur is able to maintain total control over all decisions and
the business itself. Bootstrapping is building a company from the
ground up with nothing but personal savings. The bootstrapped
entrepreneur retains total control of the business and makes all of
the decisions. It is rarely a quick way to turn a profit but
bootstrapping can be a way to start slowly bringing in revenue.
Bootstrapping allows business owners to experiment more with their
brand as there is no pressure from investors to get the product right
the first time. Bootstrapping is an attractive way to launch and run
a startup for many founders, primarily because it gives more freedom
to the founders than getting investors to invest in the company.
Bootstrapping a
business is difficult, but it is by no means impossible. With the
right amount of hard work, collaboration, and passion for your
company, it is almost easy to give up a chunk of your personal life
today for the sake of your future. Ultimately, bootstrapping is
making an investment in yourself that will pay off for your company
in the long run. Finance your own business and keep 100 percent.
Bootstrapping a startup means starting lean and without the help of
outside capital. It means continuing to fuel growth internally from
cash flow produced by the business. Bootstrapping your startup means
growing your business with little or no venture capital or outside
investment. It means relying on your own savings and revenue to
operate and expand. Bootstrapping a business is a lesson in hard work
and flexibility but ultimately it can help accelerate a company’s
success. By definition, the term bootstrapping generally refers to a
“self-starting process that is supposed to proceed without external
input.” In the world of entrepreneurship, bootstrapping a startup
refers to launching the enterprise without external funding. But for
most founders, bootstrapping a startup really means launching without
seeking venture capital, angel investors or other types of investment
capital.
The Pros of
Bootstrapping Your Startup
1) Ownership of
Your Business
As a solo
entrepreneur, bootstrapping means you can continue to own 100% of
your business. Even with a much smaller company and revenues, your
share may be worth more than if you raised money to achieve a billion
dollar valuation.
2) Control Over
Direction
As soon as you
take outside money you take on exterior pressure and responsibility
to satisfy other people’s interests. Those may be very different
from your vision. Their timeline and values can be different than
yours. There are solutions like super-voting rights that can give you
more control when raising capital. Though, if artistic direction and
control over decisions is a top priority for you, bootstrapping is
probably the way to go.
3) Keeping Your
Business
If your idea is
to keep this as a lifetime business, then bootstrapping is what you
want. Otherwise outside investors are going to put you on a clock for
achieving a sizeable exit. Normally within about 10 years.
4) Sense of
Accomplishment
For some
entrepreneurs, the ability to one day look at this venture and say “I
built that” is where they get their sense of significance.
5) Being Forced
to Build a Business Model That Really Works
If you are going
to bootstrap, you are forced to quickly build a business model which
really works and which can produce positive cash flow and profits
right away. That is a good thing. Everything else can be built on and
scaled from there. Find a model that makes money. Sounds like a
no-brainer but it needs to be said. The businesses that use the
bootstrapping model the best generate money quickly. Not all
businesses are equally ripe for bootstrapping. The most successful
bootstrapped companies have a business model that generates cash as
quickly as possible. Without any cash inflow, you will burn your
reserves before gaining any real traction. Focus on operations.
Bootstrapping is about focusing on the nuts and bolts, about putting
all the pieces in place so you can get to where you need to be,
eventually.
This could mean
making a minimum viable product that you can introduce to the market
and even hope to bring in steady, if not high, revenue while you
continue to pilot test other ideas.
Know Your Target
Market
You might think
that you have already done the work to define those people likely to
buy what you have got to sell. However, early sales numbers should be
the jumping off point you use to make necessary adjustments.
Branding and
Marketing
Once you have
defined what your company does, what it offers and the problem it
solves, you must focus your attention on the branding and marketing
of your company.
1. When trying
to secure press mentions with media channels, carefully analyse the
publications you are targeting and ensure that they are a right fit
for your company.
2. Once you’ve
determined which channel will publish your company's story, establish
a strong relationship with a journalist who writes articles related
to your industry.
3. Remember,
media channels only publish stories that are newsworthy, so ensure
that the story you pitch to publications would interest as wide an
audience as possible.
4. Restrict your
pitch emails to two short paragraphs or less when engaging with your
media contacts to pique their interest without boring them.
5. Establish
yourself as a well of industry knowledge and an expert in your field
to increase your chances of attracting more attention from
journalists.
6. When managing
your startup’s social media account, stay active and be consistent
with your posts. Also, make your posts fun and engage with your
followers - no one likes social media posts that look like they were
written by robots.
7. Refrain from
posting only about you and your company, so make sure the bulk of
your social media content is about industry-related articles that
your audience is interested in, sprinkled with content about your
company.
8. Research your
industry to develop your startup’s unique selling propositions.
Remember, all of your startup’s messaging should employ these USPs
as their focal point.
10. Your
startup’s content strategy should be built around whatever it is
you want your visitors to do once they arrive on your site, so be
sure to optimise your website’s internal pages for conversions.
Sales and
Traction
Sales and
traction are what startups need to start bringing in revenue and are
important metrics of success. How can you generate sales and traction
without burning up too much money in the process?
11. Highlight
the benefits and value of your product to your customers, instead of
just showcasing the features.
12. Create a
blog and develop a strong content marketing strategy to attract more
potential users to your company’s website.
13. An effective
e-mail campaign targeted to your offering’s demographic can be very
powerful in convincing your potential customers of the value of your
offering.
14. Cold call
potential customers in order to reach them quickly and get a response
without spending much money.
15. Host
contests on social media and provide your product as a reward as this
will help increase awareness and boost user engagement.
Startup Legal
and IP
Legal work can
be cumbersome, especially when you are trying to focus on the your
core product or service.
16. Designate
intellectual property to your company early on during the formation
of your startup.
17. Protect and
file intellectual property claims from others (patent trolls) with
Patents, Copyrights and Trademarks.
18. Choose the
correct legal entity carefully to protect liability for your company.
19. Take care
when drafting the terms of use documents for your product or service.
Naming and
Positioning
Naming and
positioning your company can seem like a daunting task. A name will
be the forefront of your company. Eventually it will become
synonymous with your products, services or brand. Along with this,
you will have to position your company in order to differentiate your
products or services from the rest.
Positioning
Positioning your
company helps establish your company’s brand in the eyes of the
consumer. Here are some questions to consider when positioning:
20. What makes
your company different from your competitors? Create a list of what
makes you different. This can help narrow your target market and
understand the benefits your company offers that another does not.
21. What makes
your product / service unique? Figure out what makes your company
stand out so you can use it as an advantage.
22. What are
your customers really buying from you? Besides the actual product /
service, think about the other benefits a consumer receives. These
are characteristics like quality, aesthetic, brand name, etc.
Once you have
got these basics down, you can start preparing your image:
23. Craft a
positioning statement: In a few sentences, summarise what your
company provides for your target demographic and what sets you apart,
if not above, your competitors.
24. Create
image-marketing materials that encapsulates what makes your offering
so unique and valuable.
25. Use the
positioning statement in written communication to your consumers to
establish your startup as a leading company in your market.
26. Test your
position statement on social media platform to see if you are
attracting the right market and if the imagery that you are using is
boosting user engagement.
27. Make your
company’s name memorable. Users need to be able to remember the
company name in order to share it with others.
28. Make your
company’s name spellable. If users cannot spell your company name,
they will not be able to find it when searching for your products /
services.
29. Make your
company’s name engaging. Think about what your users will associate
your company name towards? What feelings does the company name evoke?
Will they associate the name with the image of the company?
Social media is
one of the most cost-effective ways of marketing your startup. In
addition to providing a platform for growing your brand, it offers an
easy medium for promotion and customer service opportunities.
1. Be frequent
and consistent: Social media is a way for you to build your brand’s
voice. You should not only post regularly, but there should be a
uniformed identity to your posts. Additionally, do not over post or
deviate from your brand’s message.
2. It is not
about you, it is about your customer: Most brands use their social
media accounts only for promotional purposes. This is a failed
strategy as it provides no value to their followers. Instead, find
and share information that your customers want to see and
occasionally mix in your promoted content.
3. Engage with
your followers: Social media is a way for your startup to interact
with current and future customers. Leverage your followers and make
them feel like valuable members of your brand. Also, do not be afraid
of social confrontation, approach any complaint as an opportunity to
show your brand’s customer service capabilities. Lastly, do not
hide from failures, you are a startup and are bound to face some
hurdles along the way. Strategically approach these as opportunities
to win over customers with good customer service and express your
brand’s long-term vision as frequently as possible.
Content is still
king.
Why is content
so important? It is the vehicle for conveying your brand’s message.
If your content is not clear and message not well-formulated, you
will undoubtedly struggle to succeed. The value of a strong brand in
today’s crowded marketplace is worth its weight in gold. Your brand
is what makes you different. It attracts new users and gets people’s
attention among all the competition out there. Use content-marketing
tactics to attract users. Content marketing is one of the most
effective ways to reach new people. You need to maintain a strong
brand presence and keep a watchful eye on expenses.
1. Critically
think about your message: Content marketing should not be a process
of throwing messages against the wall and seeing what sticks. To
effectively brand your startup, you should engage in industry
research and formulate unique selling propositions. Your message then
needs to keep these USPs as the focal point. Avoid focusing on your
features and instead sell the benefits.
2. Do outreach
yourself: One of the most important steps to an effective content
marketing strategy is content promotion. After you produce an
incredible piece of branded content, you need to amplify that piece
of content as much as possible. Leverage your social media profiles,
reach out to LinkedIn groups or industry forums and contribute to
other popular sites that your consumers might visit. Invest a few
hours a week to outreach or off-site writing and your startup will
begin to gain traction.
Running a
startup on a shoestring budget is hard enough. If you can keep
marketing costs down while capitalising on successful digital
opportunities, you will be able to improve your brand’s visibility
without squandering a large budget.
Watch Your Cash
Like a Hawk, Daily
Evaluate every
expense carefully. When the money is rolling in, some expenses become
an after-thought. If you let your guard down and start freely
spending, it can cause a problem down the line if business slows or
you face a challenge. Being financially responsible is key. You also
develop a business survival mindset when you are constantly cautious
about expenses. Reduce overhead costs as much as you can. Overhead
expenses are the number one money-drainer of any new business. So
with limited funding, your first priority is to keep your expenses
lean. Part of reducing costs is doing as much as possible by
yourself. Ask the question, “Is this really necessary?” Before
adding a line item to your startup budget ask yourself if the expense
is really necessary and more important, be certain you know what the
return on that investment will be and how it will help you move
forward. Do not add expenses to your budget unless they really are
necessary.
Cut Personal
Expenses
Without a
salary, you will not have money to spend – so do not expect to live
a posh life when first starting your company. Consider every purchase
and only spend what is necessary. Staying frugal when you first start
out is a great way to learn the financial ropes for the times when
you start to make money. Do not think about the salary you can draw
when you are a startup - think about reinvesting the cash to grow the
business. Whatever your salary or budget is, get used to living
frugally during the first few years of your startup.
Manage an Income
Stream
Make sure that
you maintain a stable income stream while you build your startup.
Do Not Outsource
Jobs You Can do Yourself
When
bootstrapping, hiring out for a job you could do yourself is an
avoidable expense and a wasted organisational learning experience.
Invest in Your
Website Domain and Incorporating
Incorporating
and securing your website domain are major exceptions to the “price
over quality” rule. Regarding your domain, do not think you can buy
it later once you have more traction. Buy the domain outright from
the beginning and start building brand equity around it from day one.
While it is important to keep costs as low as possible, spending on
your website is a necessary and justified expense. Do not skimp on
this if this will give you the online presence that can be crucial
for your business. Optimise internal pages for conversions: What do
you want visitors to do when they land on your site? Your entire
content strategy should be built with this question in mind. Once you
know the action you want users to do then you can find affordable
tools for perpetuating those actions. Optimise forms on your site to
build a stronger inbound lead funnel. Find cheap and reliable cart
services to sell products directly through your site.
Do Not Forget
Customer Service
As a starting
venture, you need as many satisfied customers as you can to get the
word out about your brand.
Be Discerning
When Chasing Revenue
While you chase
revenue, you will randomly encounter tricky opportunities that
achieve a significant bump in growth at the expense of modifying your
operational model or product offering. Evaluate these opportunities
before jumping on them: Seize them if they’re aligned with your
long-term goals, and decline if they will become a huge distraction
from achieving further growth. At an early stage, what might appear
to be a revenue touchdown may distract you from building a real
replicable business.
Do Not Take “No”
for an Answer
When you are so
small, vendors and suppliers will not want to work with you; it will
take a personal touch to get what you need. Work to build personal
connections with partners that may help your business in the long
run. This may help obtain the resources your startup needs to get
moving, at a price that will not break the bank.
The Cons of
Bootstrapping for Startups
1) Chances of
Survival
One of the top
reasons for business failure is running out of money.
2) Growth
The main reason
that entrepreneurs go out to fundraise lots of capital is to scale
big and fast. For many, that is their strategy to survive and thrive.
Without outside capital, you will be limited on your visibility, the
marketing you can do and what you can do to serve your customers. All
of that can stunt growth potential.
4) Hard Work
You are going to
have to work a lot harder, work more hours and manage more roles as a
bootstrapped startup.
Bootstrapping
continues to be an attractive option for startup entrepreneurs. It
can bring a lot of benefits. Just be aware of the risks.
©
MultiSpectra Consultants, 2020.
